Optimism about German economy declines again

The ZEW said that its indicator of economic expectations fell for the fifth straight month, to 25.0 in August from 29.7 in July.

The index was based on a survey of 228 analysts and investors conducted between July 27 and August. 10. The reading is the lowest since November and compares with a median estimate of 31.9 in a Bloomberg survey of economists.

ZEW President Clemens Fuest said in a statement that economic activity in Germany was still running smoothly, but added: “Under the current geopolitical and global economic circumstances a substantial improvement in Germany over the medium term is unlikely”.

“That is why economic sentiment has declined”.

The Eurostoxx 50 index and Germany’s bluechip DAX share index extended losses after the ZEW reading.

“This month’s fall in ZEW investor sentiment suggests that, despite progress in Greece’s negotiations with its creditors, investors are increasingly anxious about Germany’s recovery”, James Howat of Capital Economics said.

“An increase in momentum in the coming quarters is not to be expected but neither is a decline in the rate of economic growth”. Last month, the finance ministry said that the economy would probably expand by about the same amount between April and June, with domestic demand propelling growth while foreign trade picks up.

Industrial production and exports figures released recently signaled weak growth for the second quarter. The rate of expansion will stay at 0.5 percent in each of the final two quarters of 2015, a separate survey shows. The current conditions component carried expectations for a rise to 64.3 points from 63.9 beforehand.